As filed with the Securities and Exchange Commission on June 29, 2007

Registration No. 333-____

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

AMENDMENT NO. 1

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

3DIcon Corporation

(Name of small business issuer in its charter)

Oklahoma	3669	73-1479206
(State or other Jurisdiction	(Primary Standard Industrial	(I.R.S. Employer
of Incorporation or Organization)	Classification Code Number)	Identification No.)

 

7507 S. Sandusky

Tulsa, OK 74136

(918) 492-5082

(Address and telephone number of principal executive offices

and principal place of business)

John M. O’Connor, Esq.

Newton, O’Connor, Turner & Ketchum

15 W. Sixth Street, Suite 2700

Tulsa, Oklahoma 74119

(918) 587-0101

(918) 587-0102 (fax)

(Name, address and telephone number of agent for service)

Copies to:

Gregory Sichenzia, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32 ^nd Floor

New York, New York 10006

(212) 930-9700

(212) 930-9725 (fax)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:

From time to time after this Registration Statement becomes effective.

If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same

offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same

offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

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CALCULATION OF REGISTRATION FEE 

 

Title of each class of securities to be registered		Amount to be registered (1)			Proposed maximum offering price per  share			Proposed maximum aggregate offering price			Amount of registration fee
Common stock issuable upon conversion of debentures			3,040,909	(2)	$	0.66	(3)	$	2,007,000		$	61.61

 

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(1)	Includes shares of our common stock, par value $0.002 per share, which may be offered pursuant to this registration statement, which shares are issuable upon conversion of convertible debentures held by the selling stockholder. The amount to be registered includes a good faith estimate of the number of shares issuable upon conversion of the debentures. In addition, the amount to be registered includes 200,000 shares which have been issued to a selling stockholder as compensation for services rendered.  Should the conversion ratio of our convertible debentures result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become necessary. In addition, should a decrease in the exercise price as a result of an issuance or sale of shares below the then current market price, result in our having insufficient shares, we will not rely upon Rule 416, but will file a new registration statement to cover the resale of such additional shares should that become necessary.
(2)	Includes a good faith estimate of the shares underlying convertible debentures to account for market fluctuations.

 

(3)	Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, using the average of the high and low price as reported on the Pink Sheets on June 28, 2007, which was $0.66 per share.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED June 29, 2007

3DICON CORPORATION

3,040,909 SHARES OF

COMMON STOCK

This prospectus relates to the resale by the selling stockholders of up to 3,040,909 shares of our common stock including 2,840,909 shares, underlying a $1.25 million convertible debenture and 200,000 shares which have been issued to a selling stockholder as compensation for services rendered. The conversion formula for the convertible debenture, as amended, is $0.35 per share until our common stock is quoted on the OTCBB or is otherwise listed and trading on NASDAQ or a national securities exchange and thereafter the lesser of (i) $2.00 or (ii) seventy percent of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The selling stockholder may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price or in negotiated transactions. The selling stockholder may be deemed an underwriter of the shares of common stock, which it is offering. We will pay the expenses of registering these shares.

Our common stock is listed on the Pink Sheets under the symbol "TDCP". The last reported sales price per share of our common stock as reported by the Pink Sheets on June 28, 2007, was $0.70.

Investing in these securities involves significant risks. See "Risk Factors" beginning on page 5.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is _______, 2007.

The information in this Prospectus is not complete and may be changed. This Prospectus is included in the Registration Statement that was filed by 3DIcon Corporation with the Securities and Exchange Commission. The selling stockholder may not sell these securities until the registration statement becomes effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the sale is not permitted.

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The Offering
Common stock offered by selling stockholder		Up to 3,040,909 shares including 2,540,909 shares, underlying a convertible debenture in the amount of $1,250,000, based on current market prices and assuming full conversion of the convertible debenture (includes a good faith estimate of the shares underlying convertible debenture and 200,000 shares which have been issued to a selling stockholder as compensation for services rendered). This number represents approximately 2.7% of our then current outstanding stock.
Common stock to be outstanding after the offering		Up to 115,454,866 shares assuming the full conversion of our initial $1.25 million convertible debenture.
Use of proceeds		We will not receive any proceeds from the sale of the common stock. We have received gross proceeds of $125,000 and expect to receive additional gross proceeds of $1,125,000 in connection with the issuance of the convertible debenture to the selling stockholder. We plan to use the proceeds for research and development, general working capital purposes and the payment of professional fees.
Pink Sheets Ticker Symbol		TDCP

 

The above information regarding common stock to be outstanding after the offering is based on 112,413,957 shares of common stock outstanding as of June 28, 2007 and assumes the subsequent conversion of the $1.25 million convertible debentures by our selling stockholder.

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To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006, as amended on December 15, 2006 (the “Purchase Agreement”), for the sale of a 6 ¼% convertible debenture of the Company in the principal amount of $1,250,000. Pursuant to the Purchase Agreement, at such time as the principal balance of this debenture is less than $400,000, the Company shall have the right to require Golden Gate to purchase a second debenture, also in the principal amount of $1,250,000. On November 3, 2006, we also issued to Golden Gate a 6 ¼% convertible debenture in a principal amount of $100,000 and warrants to purchase 1,000,000 shares of our common stock at an exercise price of $10.90. This prospectus relates to the resale of the common stock underlying the initial $1.25 million convertible debenture only. 

Golden Gate provided us with $125,000 upon execution of the Purchase Agreement. Pursuant to the Purchase Agreement, Golden Gate is required to provide us with an additional $312,500 upon effectiveness of the registration statement of which this prospectus is a part. The balance of $812,500 shall be wired to the escrow agent, which is required to release $200,000 on the first day of each month, beginning with the second month following the effective date of the registration statement.

The debentures are convertible into our common stock, at the selling stockholder’s option. The 6.15% $1.25 million convertible debentures mature three years from the date of issuance. The 4.75% $100,000 convertible debenture matures five years from the date of issuance. Interest on our 6 ¼% convertible debentures is payable monthly in cash or, at Golden Gate’s option, in shares of common stock of the Company valued at the then applicable conversion price. The initial $1.25 million convertible debenture is convertible into the number of our shares of common stock equal to the dollar amount of the debenture divided by the conversion price. The conversion price for the initial $1.25 million convertible debenture is the lesser of (i) $2.00 or (ii) 70% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The conversion price for the second $1.25 million convertible debenture is the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The conversion price for the $100,000 convertible debenture is the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. Accordingly, there is in fact no limit on the number of shares into which the debentures may be converted over time. If Golden Gate elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, 3DIcon shall have the right to prepay that portion of the debenture that Golden Gate elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

In addition, 3DIcon entered into a registration rights agreement with Golden Gate pursuant to which the Company agreed to file, within 30 days after the closing, the registration statement of which this prospectus is a part covering the common stock issuable upon conversion of the initial $1.25 million debenture only. In the event we fail to meet this schedule and other timetables provided in the registration rights agreement, liquidated damages and other potential penalties could be imposed (for example, the discount multiplier of 70% shall decrease by three percentage points for each month or partial month occurring after we fail to meet the timetables provided in the registration rights agreement). In addition, Golden Gate may demand repayment of one hundred and fifteen percent (115%) of the principal amount of the debenture, together with all accrued and unpaid interest on the principal amount of the debenture, in cash, if we fail to meet the timetables provided in the registration rights agreement.

We agreed to amend the securities purchase agreement (“Amendment No. 1”) such that the issuance of the Second Debenture was now at our option, rather than as of right. In addition, we agreed to amend the securities purchase agreement, the debenture, the registration rights agreement and Amendment No. 1 to extend the deadline for effectiveness of the registration statement until June 15, 2007 and to provide for fixed conversion prices on all three debentures until such time as our common stock is quoted on the OTCBB or is otherwise listed and trading on NASDAQ or a national securities exchange. The conversion price of the initial $1.25 million debenture, as amended, is now $0.35 per share until our common stock is listed on the OTCBB or is otherwise listed and trading on NASDAQ or a national securities exchange and thereafter the lesser of (i) $2.00 or (ii) 70% of the average of the five lowest Volume Weighted Average Prices during the twenty (20) days prior to the conversion. The conversion price of the second debenture, as amended, is now $0.35 per share until our common stock is listed on the OTCBB or is otherwise listed and trading on NASDAQ or a national securities exchange and thereafter the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest Volume Weighted Average Prices during the twenty (20) days prior to the conversion. The conversion price on the third debenture, as amended, is now $0.35 per share until our common stock is listed on the OTCBB or is otherwise listed and trading on NASDAQ or a national securities exchange and thereafter the lesser of (i) $2.00 or (ii) 80% of the average of the five lowest Volume Weighted Average Prices during the twenty (20) days prior to the conversion.

 

In the event the Company elects, and Golden Gate fails, to enter into the second debenture, Golden Gate would be required to pay liquidated damages in the amount of $250,000.

To obtain funding for ongoing operations, the Company entered into a Bridge Financing Agreement with Golden Gate which closed on June 11, 2007 (the “Financing Agreement”), for the sale of a 9.75% convertible debenture in the principal amount of $700,000. Pursuant to the Financing Agreement, the Company agreed to file a registration statement with the SEC within three days of closing for the resale of the common stock underlying the initial $1.25 million convertible debenture as discussed in Note 6.

The debenture may be converted, at Golden Gate’s option, in whole or in part, into restricted shares of the Company’s common stock. The conversion price will be $0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin Board or other trading market that the SEC recognizes as a trading market, or January 1,2008.  Subsequently, the conversion price is equal to 72% of the average of the five lowest volume weighted average prices for the common stock for the 20 trading days prior to the conversion date. The convertible debenture matures June 11, 2007; subject to an option held by Golden Gate to extend the maturity for one period of six months. Interest on the convertible debenture is payable monthly in cash.

 

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In addition to standard default provisions concerning timeliness of payments, delivery and notifications, any other event of default, as defined in the debenture, will accelerate the maturity date of the debenture, and all outstanding principal and accrued and unpaid interest along with $250,000 in liquidated damages, will become immediately due and payable. Such events of default include: failure to observe or perform material covenants of any notes; the making of a representation or warranty in any material agreement, report of financial statement; filing of a voluntary or involuntary proceeding for bankruptcy by the Company; a default under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument; the common stock of the Company trades below $0.21 per share; the Company is a party to any Change of Control Transaction and agrees to sell or dispose of all or in excess of 33% of its assets in one or more transactions (whether or not such sale would constitute a Change of Control Transaction) or shall redeem or repurchase more than ten percent (10%) of its outstanding shares of Common Stock or other equity securities of the Company; the Company does not file the Registration Statement, as amended to reflect the Company’s responses to the latest comments made to such Registration Statement by the Commission relating to the Registration Rights Agreement dated November 3, 2006 between the Company and Golden Gate Investors Inc. by June 14, 2007 or the related Registration Statement is not declared effective by the Commission on or prior to September 14, 2007; if during the effectiveness period of such Registration Statement its effectiveness lapses or the selling stockholder is unable to sell its shares for a period of 20 days; the Company fails to deliver certificates following a conversion under the debenture within 3 days; or any monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their respective property or other assets for more than $250,000, and such judgment, writ or similar final process shall remain unvacated, unabandoned or unstayed for a period of 45 calendar days.

 

The Debenture is secured by the pledge of 11 million shares of common stock held by affiliates in the Company (the “Pledged Shares”). Such shares shall have been held by the Pledgors for a period of not less than two years. In the event of a default and the Company has not repaid all outstanding principal and accrued and unpaid interest, along with the liquidated damages of $250,000 within one day of default, Golden Gate shall have the right to immediately sell the Pledged Shares in satisfaction of any amounts of principal and interest owing under the Debenture. Golden Gate shall only sell such amount of Pledged Shares to satisfy any principal and accrued interest, along with $250,000 in liquidated damages and shall return unsold shares to the Pledgors .

 

See the "Selling Stockholders" and "Risk Factors" sections for a complete description of the convertible debentures.

 

					Effective			Number			% of
% Below		Price Per			Conversion			of Shares			Outstanding
Market		Share			Price			Issuable			Stock
25%		$	0.525		$	0.378			1,851,851			1.6	%
50%		$	0..350		$	0.252			2,777,777			2.5	%
75%		$	0.175		$	0.126			5,555,555			4.9	%

 

As illustrated, following our common stock being quoted on the OTCBB or otherwise trading on Nasdaq or a national securities exchange, the number of shares of common stock issuable upon conversion of our convertible debentures will increase if the market price of our stock declines, which will cause dilution to our existing stockholders.

The continuously adjustable conversion price feature of our 6.25% and 9.75% convertible debentures following our common stock being quoted on the OTCBB or otherwise trading on Nasdaq or a national securities exchange may encourage investors to make short sales in our common stock, which could have a depressive effect on the price of our common stock.

So long as the market price of our stock is below $2.00 following our common stock being quoted on the OTCBB or otherwise trading on Nasdaq or a national securities exchange, the issuance of shares in connection with the conversion of the $1.25 million convertible debenture results in the issuance of shares at an effective 30% discount to the trading price of the common stock prior to the conversion. Similarly, so long as the market price of our stock is below $4.00, the issuance of shares in connection with the conversion of the $100,000 convertible debenture results in the issuance of shares at an effective 20% discount to the trading price of the common stock prior to the conversion. The significant downward pressure on the price of the common stock as the selling stockholder converts and sells material amounts of common stock could encourage short sales by investors. This could place further downward pressure on the price of the common stock. The selling stockholder could sell common stock into the market in anticipation of covering the short sale by converting their securities, which could cause the further downward pressure on the stock price. In addition, not only the sale of shares issued upon conversion or exercise of debentures and warrants, but also the mere perception that these sales could occur, may adversely affect the market price of the common stock.

The issuance of shares upon conversion of the 6.25% and 9.75% convertible debentures and exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.

The issuance of shares upon conversion of our 6 ¼% convertible debentures and exercise of warrants may result in substantial dilution to the interests of other stockholders since the selling stockholder may ultimately convert and sell the full amount issuable on conversion. Although the selling stockholder may not convert its convertible debentures and/or exercise their warrants if such conversion or exercise would cause it to own more than 9.9% of our outstanding common stock, this restriction does not prevent the selling stockholder from converting and selling some of their holdings and then converting the rest of their holdings. In this way, assuming the market price remains at a level acceptable to the selling stockholder, the selling stockholder could continue on a “conversion-sell-conversion” trend while never holding more than 9.99% of our common stock. Further, under the convertible debentures there is theoretically no upper limit on the number of shares that may be issued, which will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock, including investors in this offering.

If we are unable to issue shares of common stock upon conversion of the convertible debenture as a result of our inability to increase our authorized shares of common stock or as a result of any other reason, we are required to pay penalties to Golden Gate, redeem the convertible debenture at 130% and/or compensate Golden Gate for any buy-in that it is required to make.

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If we are unable to issue shares of common stock upon conversion of the convertible debenture as a result of our inability to increase our authorized shares of common stock or as a result of any other reason, we are required to:

·

pay late payments to Golden Gate for late issuance of common stock upon conversion of the convertible debenture, in the amount of $100 per business day after the delivery date for each $10,000 of convertible debenture principal amount being converted or redeemed.

·

in the event we are prohibited from issuing common stock, or fail to timely deliver common stock on a delivery date, or upon the occurrence of an event of default, then at the election of Golden Gate, we must pay to Golden Gate a sum of money determined by multiplying up to the outstanding principal amount of the convertible debenture designated by Golden Gate by 130%, together with accrued but unpaid interest thereon

·

if ten days after the date we are required to deliver common stock to Golden Gate pursuant to a conversion, Golden Gate purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by Golden Gate of the common stock which it anticipated receiving upon such conversion (a "Buy-In"), then we are required to pay in cash to Golden Gate the amount by which its total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds the aggregate principal and/or interest amount of the convertible debenture for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full.

In the event that we are required to pay penalties to Golden Gate or redeem the convertible debentures held by Golden Gate, we may be required to curtail or cease our operations.

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We may be required to file a subsequent registration statement covering additional shares.

 

Based on our current market price and the potential decrease in its market price as a result of the issuance of shares upon conversion of the convertible debentures, we have made a good faith estimate as to the amount of shares of common stock that it is required to register and allocate for conversion of the convertible debentures. In the event that our stock price decreases, the shares of common stock we have allocated for conversion of the convertible debentures and are registering hereunder will not be adequate. If the shares we have allocated to the registration statement are not adequate and we are required to file an additional registration statement, we may incur substantial costs in connection with the preparation and filing of such registration statement.

Risks Relating to Our Common Stock  :

 

Fluctuations in our operating results and announcements and developments concerning our business affect our stock price.

 

Our quarterly operating results, the number of stockholders desiring to sell their shares, changes in general economic conditions and the financial markets, the execution of new contracts and the completion of existing agreements and other developments affecting us, could cause the market price of our common stock to fluctuate substantially.

Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the Trading Market in Our Securities is Limited, Which Makes Transactions in Our Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

Our common stock is quoted on the Pink Sheets under the symbol "TDCP". To date there is a limited trading market in our common stock on the Pink Sheets. Failure to develop or maintain an active trading market could negatively affect the value of our shares and make it difficult for our shareholders to sell their shares or recover any part of their investment in us. The market price of our common stock may be highly volatile. In addition to the uncertainties relating to our future operating performance and the profitability of our operations, factors such as variations in our interim financial results, or various, as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

	·	that a broker or dealer approve a person's account for transactions in penny stocks; and
	·	the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

	·	obtain financial information and investment experience objectives of the person; and
	·	make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

	·	sets forth the basis on which the broker or dealer made the suitability determination; and
	·	that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

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Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

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Quarter Ended		High ($)			Low ($)
June 30, 2007 (through June 28, 2007)			0.70			0.32
March 31, 2007			0.70			0.39
December 31, 2006			1.29			0.36
September 30, 2006			1.73			0.90
June 30, 2006			3.27			0.56
March 31, 2006			0.86			0.14
December 31, 2005			0.33			0.014
September 30, 2005			0.03			0.008
June 30, 2005			0.045			0.009
March 31, 2005			0.18			0.031
December 31, 2004			0.40			0.04
September 30, 2004			0.64			0.15
June 30, 2004			0.64			0.03
March 31, 2004			0.21			0.04

Holders

As of June 28, 2007, we had approximately 397 active holders of our common stock. The number of active record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. The transfer agent of our common stock is Executive Registrar & Transfer, Inc., 315 South Huron Street, Suite 104, Englewood, CO 80110.

Competition

There are numerous technologies which are under development to enable the display of 3D images. The following is a summary of research being conducted and products under development in the 3D display system marketplace of which we are currently aware.

Rosen et al report on a psychophysical comparison of visual perception for a 3D display (the Perspecta produced by Actuality Systems) and a high-resolution flat-panel display. The results indicated that the binocular view of Perspecta was similar or slightly better in performance than the monoscopic view of flat-panel display, because of its low contrast.

A collaborative paper from Cambridge University and the MIT Media Lab reports that a DMD can be used to launch view-sequential 3D images, leading to the construction a virtual 3D image. This paper provides further reinforcement of the utility of DMD devices for 3D imaging and display applications.

Matsuda and Kakeya propose a 3D camera system that implements combinational techniques using hardware and software to capture object images from both eyes of the viewer. An image captured by only one camera is not sufficient to supply the information needed to reconstruct a 3D image back from the viewpoint of a free observer. The authors propose the use of a stereo camera which, with the aid of 3D position sensors, can follow the viewer’s motion and send the information back to a camera system using a computational algorithm. Such an approach might prove useful in recording images for subsequent display on 3D visualization systems.

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Fujii and Tanimoto report the investigation of two types of real-time Ray-Space acquisition systems. The first system used 16 cameras, all connected via a PC cluster, to capture the information for subsequent 3D image display. The second system used a single high-speed camera with scanning optics and offered better performance due to the ability to capture a real-time Ray-Space at video rates.    

The DepthCube ^TM Technology system consists of a rear projection volumetric computer monitor that produces 3D images. Unlike a conventional projection surface, the DepthCube incorporates an electronically-controlled multiplanar optical element (MOE) that allows the formation of 3D volumetric images. The display also incorporates Texas Instruments’ (TI’s) DLP technology and is capable of 1500 frames per second. While this is impressive technology for a variety of visualization applications, it does not represent the kind of technology 3DIcon intends to develop.

The FELIX Technology display is a technology that uses the swept volume technique, where a rotating projection screen sweeps out a volume upon which a 3D image can be formed. This FELIX 3D appears to represent a viable technology that would likely compete with 3DIcon on some level.

A related technology is the SOLID FELIX static volume 3D display which uses a solid cube of transparent crystalline material doped with rare earth ions. The rare earth ions are capable of producing visible light by a two-frequency upconversion (frequency-doubling) process when illuminated with intersecting infrared laser beams.

The Perspecta Spatial 3D Technology 3D display presents another example of a technology that utilizes a rotating projection screen. The display uses three of TI’s DMDs to direct red, green, blue light beams onto the rotation screen at the appropriate times to form 3D volumetric images. Again, the Perspecta Spatial 3D display appears to represent a viable technology that would likely compete with 3DIcon on some level.

The VR4MAX Technology demonstrates another screen-based approach to 3D visualization. As in the case of the DepthCube, while VR4MAX is no doubt useful for a variety of visualization applications, it does not represent the kind of technology 3DIcon wants to develop.

The FogScreen technology by itself does not represent a 3D display. Rather, it may prove to be a viable volumetric screen for space projection implementations. A FogScreen unit consists of a water tank, water level controller, water filter, water fountain, and a number of hydrosonic generators. The unit produces a dry fog which can provide a source of small particles off of which light can be scattered to display images.

Employees

3DIcon Corporation has three full-time employees. We have identified the need for additional personnel, including a marketing manager, a product manager and a product development engineer/manager. The marketing manager would lead the creation of the specifications of what we should build and create all necessary materials to successfully launch the product including an analysis of competitive technologies. The responsibilities of the product manager would include working with the University of Oklahoma and the marketing organization to develop detailed specifications of the product, maintain the schedule, and bring the product to market in a timely fashion. The responsibilities of the product development engineer/manager would include seeking out competent manufacturers, understanding the details of the design, and overseeing production of a product within the guidelines of manufacturability and serviceability.

Name		Age		Position
Martin Keating		65		Chief Executive Officer, Director
Vivek Bhaman		41		President, Chief Operating Officer
Philip Suomu		52		Director
John O’Connor		52		Director

 

Martin Keating has been the President, Chief Executive Officer and a director of 3DIcon since 1998. Previously, Mr. Keating organized and managed private placement limited partnerships, ranging from real estate development to motion picture financing. Mr. Keating was also general counsel and director of investor relations for CIS Technologies, then a NASDAQ company. Mr. Keating wrote and published "The Final Jihad," a terrorist suspense novel. Mr. Keating is an attorney licensed to practice law in Oklahoma and Texas.

Vivek Bhaman has been the President and Chief Operating Officer of 3DIcon since May 2007. He has held leadership positions in VeriFone, Hewlett-Packard, and with global media giants Omnicom Group and the Interpublic Group. For more than 15 years, Mr. Bhaman has been at the forefront of introducing new technologies and products to markets across the world. His spectrum includes consumer and business technologies such as cell phones and secure e-commerce transaction systems for Verifone/HP, where he was responsible for launching and managing the Asia-Pacific operations of the Electronic Commerce division. His involvement extended from development to marketing/sales. Prior to joining 3DIcon, Mr. Bhaman successfully led the startup and marketing operations for an enterprise-software technology company, including its acquisition of marquee customers Walt Disney, Southern California Edison, and Freeman Group. Mr. Bhaman holds a Bachelors Degree in Engineering and an MBA with specializations in Marketing and Finance.

Philip Suomu has been a director of 3DIcon since October 2006 and its Director of Technology since May 2005. Mr. Suomo works for 3DIcon on a part-time basis. Since January, 2001, Mr. Suomu has served as President of PNERC Associates L.P., which provides financial and technical guidance for new business development. From April 1997 to September 2001, Mr. Suomu held the position of Director of Sales for CIENA Communications, which manufactures and markets advanced fiber optic equipment for the telecommunications industry.

-24-

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John O’Connor has been a director of 3DIcon since October 2006. Since 1981, Mr. O’Connor has practiced law in Oklahoma, concentrating in the areas of corporate and commercial law. Mr. O’Connor served as President of the law firm of Newton, O’Connor, Turner & Ketchum from 2001 to 2005 and has served as its Chairman from 2001 to present.

Director Compensation

The directors of the Company did not receive any compensation during the fiscal year ended December 31, 2006.

Employment Agreements

None.

Audit Committee

We do not have a separately designated standing audit committee.

Code of Ethics

We have not adopted a Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of our officers, directors and employees.

-25-

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CONTENTS

 

For the Three Months Ended March 31, 2007 of 3DIcon Corporation
Balance Sheet as of March 31, 2007 (Unaudited)		F-2
Statements of Operations for the three months ended March 31, 2007 and 2006 and from inception (January 1, 2001) to March 31, 2007 (Unaudited)		F-3
Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2007 and from inception (January 1, 2001) to March 31, 2007 (Unaudited)		F-4
Statements of Cash Flows for the three months ending March 31, 2007 and 2006 and from inception (January 1, 2001) to March 31, 2007 (Unaudited)		F-6
Notes to Financial Statements March 31, 2007 (Unaudited)		F-7
For the Years Ended December 31, 2006 and 2005 of 3DIcon Corporation
Report of Independent Registered Public Accounting Firm		F-19
Balance Sheets as of December 31, 2006 and 2005		F-20
Statements of Operations for the years ended December 31, 2006 and 2005 and period from inception (January 1, 2001) to December 31, 2006		F-21
Statements of Changes in Stockholders’ Deficiency for the period from inception (January 1, 2001) to December 31, 2006		F-22
Statements of Cash Flows for the years ended December 31, 2006 and 2005 and for the period from inception
(January 1, 2001) to December 31, 2006		F-24
Notes to Financial Statements, December 31, 2006 and 2005 and for period from inception (January 1, 2001) to December 31, 2006		F-25

 

-33-

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3DIcon CORPORATION

(A Development Stage Company)

March 31, 2007

(Unaudited)

 

CONTENTS

 

Balance Sheet as of March 31, 2007 (Unaudited)		F-2
Statements of Operations for the three months ended March 31, 2007 and 2006 and for period from inception (January 1, 2001) to March 31, 2007 (Unaudited)		F-3
Statements of Changes in Stockholders’ Deficiency for period from inception (January 1, 2001) to March 31, 2007		F-4
Statements of Cash Flows for the three months ended March 31, 2007 and 2006 and for period from inception (January 1, 2001) to March 31, 2007 (Unaudited)		F-6
Notes to Financial Statements, March 31, 2007 (Unaudited)		F-7

 

---

3DIcon CORPORATION

(A Development Stage Company)

BALANCE SHEET

March 31, 2007

(Unaudited)

 

Assets
Current assets:
Cash		$	150,864
Total current assets			150,864
Property and equipment, net			4,810
Debt issue costs, net			135,130
Total assets		$	290,804
Liabilities and Stockholders' Deficiency
Current liabilities:
Current maturities of convertible debentures payable		$	555,000
Accounts payable			384,945
Note payable - related party			192,500
Accrued interest on debentures			34,414
Total current liabilities			1,166,859
Convertible debentures payable, less current maturities			225,000
Total liabilities			1,391,859
Stockholders' deficiency:
Common stock; $.0002 par, 250,000,000 shares authorized and 101,407,656 shares issued and outstanding			20,282
Additional paid-in capital			3,266,503
Deficit accumulated during development stage			(4,387,840	)
Total stockholders' deficiency			(1,101,055	)
Total liabilities and stockholders' deficiency		$	290,804

 

See notes to financial statements

 

F-2

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF OPERATIONS

Three months ended March 31, 2007 and 2006 and period

from inception (January 1, 2001) to March 31, 2007

 

		Three Months Ended March 31, 2007			Three Months Ended March 31, 2006			Inception to March 31, 2007
Income:
Sales		$	-		$	-		$	-
Expenses:
Research and development			104,611			240,355			593,482
General and administrative			800,652			157,697			3,875,796
Interest			13,044			5,652			43,562
Total expenses			918,307			403,704			4,387,840
Net loss		$	(918,307	)	$	(403,704	)	$	(4,387,840	)
Loss per share:
Basic and diluted		$	(.009	)	$	(.005	)
Weighted average shares outstanding, basic
and diluted			100,940,776			76,804,025

 

See notes to financial statements

F-3

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

Three months ended March 31, 2007 and 2006 and period

from inception (January 1, 2001) to March 31, 2007

(Unaudited)

 

											Deficit
											Accumulated
								Additional			During the
		Common Stock						Paid-In			Development
		Shares			Par Value			Capital			Stage			Total
Balance, January 1, 2001 - as reorganized			27,723,750		$	27,724		$	193,488		$	-		$	221,212
Adjustment to accrue compensation earned but not recorded			-			-			-			(60,000	)		(60,000	)
Stock issued for services			2,681,310			2,681			185,450			-			188,131
Stock issued for cash			728,500			729			72,121			-			72,850
Net loss for the year			-			-			-			(259,221	)		(259,221	)
Balance, December 31, 2001			31,133,560			31,134			451,059			(319,221	)		162,972
Adjustment to record compensation earned but not recorded			-			-			-			(60,000	)		(60,000	)
Stock issued for services			3,077,000			3,077			126,371			-			129,448
Stock issued for cash			1,479,000			1,479			146,421			-			147,900
Net loss for the year			-			-			-			(267,887	)		(267,887	)
Balance, December 31, 2002			35,689,560			35,690			723,851			(647,108	)		112,433
Adjustment to record compensation earned but not recorded			-			-			-			(90,000	)		(90,000	)
Stock issued for services			15,347,000			15,347			-			-			15,347
Stock issued for cash			1,380,000			1,380			33,620			-			35,000
Reverse split 1:10			(47,174,904	)		-			-			-			-
Par value $0.0001 to $0.0002			-			(51,369	)		51,369			-			-
Net loss for the year			-			-			-			(51,851	)		(51,851	)
Balance, December 31, 2003			5,241,656			1,048			808,840			(788,959	)		20,929
Additional Founders shares issued			25,000,000			5,000			(5,000	)		-			-
Stock issued for services			24,036,000			4,807			71,682			-			76,489
Stock issued for cash			360,000			72			28,736			-			28,808
Warrants issued to purchase common stock at $.025			-			-			18,900			-			18,900
Warrants issued to purchase common stock at $.05			-			-			42,292			-			42,292
Stock warrants exercised			2,100,000			420			60,580			-			61,000
Net loss for the year			-			-			-			(617,875	)		(617,875	)
Balance, December 31, 2004			56,737,656			11,347			1,026,030			(1,406,834	)		(369,457	)

 

See notes to financial statements

F-4

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY (con't)

Three months ended March 31, 2007 and 2006 and period

from inception (January 1, 2001) to March 31, 2007

(Unaudited)

 

											Deficit
											Accumulated
								Additional			During the
		Common Stock						Paid-In			Development
		Shares			Par Value			Capital			Stage			Total
Stock issued for services			5,850,000		$	1,170		$	25,201		$	-		$	26,371
Stock issued to settle liabilities			5,000,000			1,000			99,000			-			100,000
Stock issued for cash			1,100,000			220			72,080			-			72,300
Warrants issued to purchase common stock at $.025			-			-			62,300			-			62,300
Warrants issued to purchase common stock at $.05			-			-			140,400			-			140,400
Stock warrants exercised			5,260,000			1,052			172,948			-			174,000
Net loss for the year			-			-			-			(592,811	)		(592,811	)
Balance, December 31, 2005			73,947,656			14,789			1,597,959			(1,999,645	)		(386,897	)
Stock issued for services			4,700,000			940			205,597			-			206,537
Debentures converted			3,000,000			600			149,400			-			150,000
Stock issued for cash			200,000			40			16,160			-			16,200
Warrants issued to purchase
common stock at $.025			-			-			18,400			-			18,400
Warrants issued to purchase
common stock at $.05			-			-			15,400			-			15,400
Warrants converted to purchase common stock at $.025			10,220,000			2,045			253,455			-			255,500
Warrants converted to purchase common stock at $.05			6,260,000			1,252			311,748			-			313,000
Net loss for the year			-			-			-			(1,469,888	)		(1,469,888	)
Balance, December 31, 2006			98,327,656			19,666			2,568,119			(3,469,533	)		(881,748	)
Debentures converted			200,000			40			9,960			-			10,000
Warrants converted to purchase common stock at $.025			1,200,000			240			29,760			-			30,000
Warrants converted to purchase common stock at $.05			1,680,000			336			83,664			-			84,000
Options issued for services			-			-			575,000			-			575,000
Net loss for the period			-			-			-			(918,307	)		(918,307	)
Balance, March 31, 2007			101,407,656		$	20,282		$	3,266,503		$	(4,387,840	)	$	(1,101,055	)

 

See notes to financial statements

 

F-5

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

Three months ended March 31, 2007 and 2006 and period

from inception (January 1, 2001) to March 31, 2007

(Unaudited)

		Three Months Ended March 31, 2007			Three Months Ended March 31, 2006			Inception to March 31, 2007
Cash Flows from Operating Activities
Net loss		$	(918,307	)	$	(403,704	)	$	(4,387,840	)
Adjustments to reconcile net loss to net cash used in operating activities:
Options and stock issued for services			575,000			-			1,217,323
Depreciation			-			27			352
Asset impairments			-			-			292,203
Change in:
Prepaid expenses and other assets			(30,534	)		2,686			(135,130	)
Accounts payable and accrued liabilities			15,774			103,769			448,358
Net cash used in operating activities			(358,067	)		(297,222	)		(2,564,734	)
Cash Flows from Investing Activities
Purchase of office furniture and equipment			-			-			(5,162	)
Cash Flows from Financing Activities
Proceeds from stock and warrant sales and exercise of warrants			114,000			272,388			1,588,250
Proceeds from issuance of debentures			192,500			-			1,132,500
Net cash provided by financing activities			306,500			272,388			2,720,750
Net increase (decrease) in cash			(51,567	)		(24,834	)		150,854
Cash, beginning of period			202,431			147,371			10
Cash, end of period		$	150,864		$	122,537		$	150,864
Supplemental Disclosures
Non-Cash Investing and Financing Activities
Conversion of debentures to common stock		$	10,000		$	-		$	160,000

 

See notes to financial statements

 

F-6

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3DIcon CORPORATION

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS.

Three Months Ended March 31, 2007 and 2006 and period

from Inception (January 1, 2001) to March 31, 2007

 

Note 1 - Organization and Operations

 

Basis of Presentation

 

The accompanying financial statements of 3DIcon Corporation (the “Company”) have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's year end audited financial statements and related footnotes included in the registration statement on pages 18 through 28. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2007, and the statements of its operations, changes in stockholders' deficiency and cash flows for the three month periods ended March 31, 2007, and 2006 and the period from inception (January 1, 2001) to March 31, 2007, have been included. The results of operations for interim periods may not be indicative of the results which may be realized for the full year.

 

Organization

3DIcon Corporation was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001, and the financial information presented is from that date through the current period. The Company has accounted for this transition as a reorganization and accordingly, restated its capital accounts as of January 1, 2001. From January 1, 2001, the Company's primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the formation and commercialization of interactive, optical holography for the communications and entertainment industries.

 

F-7

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Note 1 - Organization and Operations (continued)

The mission of the Company is to pursue, develop and market full-color, 360-degree person-to-person holographic technology. Its primary focus is to invest and participate in the commercialization of optical holographic technologies now planned and/or under development, particularly those employing derivative broadband, satellite-based systems.

Uncertainties

The accompanying financial statements have been prepared on a going concern basis. The Company is in the development stage and has no source of revenue to fund the development of its planned product or to pay operating expenses. This has resulted in the Company realizing a cumulative net loss of $4,387,840 for the period from inception (January 1, 2001) to March 31, 2007. The Company is currently in default of its obligations under its Sponsored Research Agreement (SRA), (Note 5) and its 8% unsecured debentures due December 31, 2007. The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned products. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management plans to fund the future operations of the Company with the proceeds from exercise of stock warrants of up to $330,000 in 2007 and $70,000 in 2008. Further, the Company has negotiated funding from Golden Gate Investors, Inc. (see Notes 6 and 10) and is continuing to pursue additional capitalization through Rule 144 stock sales, debentures, and other venture capital investments. There is also the possibility of revenue in 2007 from sales and licensing of the Company’s products.

 

Note 2 - Summary of Significant Accounting Policies

Research and development

Research and development costs, including payments made to the University of Oklahoma pursuant to the Sponsored Research Agreement (“SRA”), are expensed as incurred. (Note 5)

Stock-based compensation

The Company accounts for stock-based compensation arrangements for employees in accordance with Statement of Accounting Standard (SFAS) No. 123(R), Share-Based Payments. The Company recognizes expenses for employee services received in exchange for stock based on the grant-date fair value of the shares awarded. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation , and the related Emerging Issues Task Force (EITF) Consensuses.

 

F-8

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Income taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes . SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, SFAS No. 109 requires the recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. The amount of deferred tax liabilities or assets is calculated using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes

Note 2 - Summary of Significant Accounting Policies (continued)

the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

In determining the quarterly provision for income taxes, the Company uses an annual effective tax rate based on expected annual income and statutory tax rates. Significant discreet items are separately recognized in the income tax provision in the quarter in which they occur.

Net income (loss) per common share

The Company computes net income (loss) per share in accordance with SFAS No. 128 , Earnings per Share and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of SFAS No. 128 and SAB 98, basic net income (loss) per common share is based on the weighted-average outstanding common shares. Diluted net income (loss) per common share is based on the weighted-average outstanding shares adjusted for the dilutive effect of warrants and options to purchase common stock and convertible debentures. Due to the Company’s 1osses, such potential dilutive securities are antidilutive for all periods presented. The number of additional shares that would be issued if all warrants, options and convertible debentures were exercised or converted is 24,566,607and 20,280,000 at March 31, 2007 and 2006, respectively.

Use of estimates

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

Note 3 - Recent Accounting Pronouncements

The following are summaries of recent accounting pronouncements that are relevant to the Company:

 

F-9

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Note 3 - Recent Accounting Pronouncements (continued)

In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48 , Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109 , Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 beginning January 1, 2007, as required, with no effect on its financial statements.

 

Note 6 - Debentures Payable

Debentures payable consist of the following:

 

		March 31, 2007
Senior Convertible Debentures:
8.00% Debentures due 2007		$	125,000
6.25% Debentures due 2009			125,000
4.75% Debentures due 2011			100,000
			350,000

 

8.00% Unsecured Debentures due 2007			430,000
Total Debentures			780,000
Less - Current Maturities			(555,000	)
Long-term Debentures		$	225,000

 

F-11

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Note 6 - Debentures Payable (continued)

 

Senior debenture payable

The Company issued convertible debentures aggregating $160,000 during 2005 and issued an additional $125,000 during 2006 at par value for cash. The debentures bear interest at 8% per annum, and are due no later than December 31, 2007. The Company may prepay without penalty all of the outstanding principal amount and accrued interest. Upon receiving notice of the Company's intent to prepay, holders of the debentures may convert the principal amount due to common stock at the rate of one share of common stock for each $.05 of principal amount converted. Upon conversion, the Company will pay all accrued interest. No fractional shares will be issued upon conversion of a debenture. During the three months ended 2007 and the year ended December 31,2006 debentures totaling $10,000 and $150,000 were converted to 3,200,000 shares of common stock, leaving $125,000 principal balance outstanding.

Unsecured debentures payable

During the third quarter of 2006 the Company authorized the issuance of unsecured convertible debentures aggregating $800,000. As of March 31, 2007 the Company has issued $430,000 of these debentures at par value for cash. The debentures bear interest at 8% per annum and are due no later than March 31, 2007. At the option of the Company, interest may be paid in cash or Common Stock, valued at the bid price on the day immediately prior to the date paid. The debentures are not secured by any asset or pledge of the Company or any officer, stockholder or director. The Company has agreed to provide, with respect to the common shares issued upon conversion of the debentures, certain registration rights under the Securities Act of 1933. The Company is in default with respect to the unsecured debentures.

F-12

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Note 6 - Debentures Payable (continued)

As a result of the default, the debentures are due in cash on the demand of the holders, but can be converted into common stock at a conversion price of $0.05 at the request of the holders at anytime. Subsequent to March 31, 2007, $275,000 of debentures were converted into 5,500,000 shares.

Securities Purchase Agreement

 

Golden Gate provided the Company with $125,000 upon execution of the Purchase Agreement. Pursuant to the Purchase Agreement, Golden Gate is required to provide the Company with an additional $312,500 upon effectiveness of the registration statement. The balance of $812,500 shall be wired to the escrow agent, which is required to release $200,000 on the first day of each month, beginning with the second month following the effective date of the registration statement.

The debentures bear interest at 6¼%, and are convertible into the Company’s common stock, at the selling stockholder’s option.  The $1.25 million convertible debentures mature three years from the date of issuance. The $100,000 convertible debenture matures five years from the date of issuance.  Interest on the 6¼% convertible debentures is payable monthly in cash or, at Golden Gate’s option, in shares of common stock of the Company valued at the then applicable conversion price. The initial $1.25 million convertible debenture is convertible into the number of the shares of common stock equal to the dollar amount of the debenture divided by the conversion price. The conversion price for the initial $1.25 million convertible debenture is (1) $.35 per share until the common stock is quoted on the OTC Bulletin Board or otherwise trading on the NASDAQ or a national securities exchange and (2) thereafter the lesser of (i) $2.00 or (ii) 70% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The conversion price for the second $1.25 million convertible debenture is (1) $.35 per share until the common stock is quoted on the OTC Bulletin Board or otherwise listed as trading on the NASDAQ or a national securities exchange and thereafter (2) the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The conversion price for the $100,000 convertible debenture is $.35 per share until the earlier of January 1, 2008 or the date the common stock is quoted on the OTC Bulletin Board or otherwise listed as trading on the NASDAQ or a national securities exchange and thereafter, the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden Gate elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden Gate elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

F-13

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In addition, the Company entered into a registration rights agreement with Golden Gate pursuant to which the Company agreed to file a registration statement of which this prospectus is a part covering the common stock issuable upon conversion of the initial $1.25 million debenture only. In the event the Company fails to meet this schedule and other timetables provided in the registration rights agreement, liquidated damages and other potential penalties could be imposed (for example, the discount multiplier of 70% shall decrease by three percentage points for each month or partial month occurring after the Company fails to meet the timetables provided in the registration rights agreement).

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

3DIcon Corporation

 

We have audited the accompanying balance sheets of 3DIcon Corporation (a Development Stage Company) as of December 3 1, 2006 and 2005, and the related statements of operations, changes in stockholders' deficiency and cash flows for the years then ended and for the period from inception (January 1, 2001) to December 31, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 3DIcon Corporation, as of December 3 1,2006 and 2005, and the results of its operations and its cash flows for the years then ended and for the period from inception (January 1, 2001) to December 3 1, 2006, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage organization, having no revenues and insufficient capital commitments to fund the development of its planned products. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plan in regard to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

April 27,2007

 

F-19

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3DIcon CORPORATION

(A Development Stage Company)

BALANCE SHEETS

December 31, 2006 and 2005

		2006			2005
Assets
Current assets:
Cash		$	202,431		$	147,371
Prepaid expenses			-			3,450
Net property and equipment			4,810			-
Debt issue costs, net			104,596			-
Total assets		$	311,837		$	150,821
Liabilities and Stockholders' Deficiency
Current liabilities:
Current maturities of convertible debentures payable		$	565,000		$	-
Accounts payable			378,007			213,696
Accrued compensation due founder			-			164,022
Accrued interest on debentures			25,578			-
Total current liabilities			968,585			377,718
Convertible debentures payable, less current maturities			225,000			160,000
Total liabilities			1,193,585			537,718
Stockholders' deficiency:
Common stock; $.0002 par, 250,000,000 shares authorized and
98,327,656 and 73,947,656 shares issued and outstanding at
December 31, 2006 and 2005, respectively			19,666			14,789
Additional paid-in capital			2,568,119			1,597,959
Deficit accumulated during development stage			(3,469,533	)		(1,999,645	)
Total stockholders' deficiency			(881,748	)		(386,897	)
Total liabilities and stockholders' deficiency		$	311,837		$	150,821

 

See notes to financial statements

 

F-20

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF OPERATIONS

Years ended December 31, 2006 and 2005

And period from Inception (January 1, 2001) to December 31, 2006

								Inception to
								December 31,
		2006			2005			2006
Income:
Sales		$	-		$	-		$	-
Expenses:
Research and development			247,687			227,042			488,871
General and administrative			1,191,683			365,769			2,950,144
Interest			30,518			-			30,518
Total expenses			1,469,888			592,811			3,469,533
Net loss		$	(1,469,888	)	$	(592,811	)	$	(3,469,533	)
Loss per share:
Basic and diluted		$	(.017	)	$	(.009	)
Weighted average shares outstanding,
basic and diluted			88,297,738			63,134,905

 

See notes to financial statements

 

F-21

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

 

Period from Inception (January 1, 2001) to December 31, 2006

												Deficit
												Accumulated
			Common Stock						Additional			During the
						Par			Paid-In			Development
			Shares			Value			Capital			Stage			Total
Balance, January 1, 2001 - as
reorganized			27,723,750		$	27,724		$	193,488		$	-		$	221,212
Adjustment to accrue compensation
earned but not recorded			-			-			-			(60,000	)		(60,000	)
Stock issued for services			2,681,310			2,681			185,450			-			188,131
Stock issued for cash			728,500			729			72,121			-			72,850
Net loss for the year			-			-			-			(259,221	)		(259,221	)
Balance, December 31, 2001			31,133,560			31,134			451,059			(319,221	)		162,972
Adjustment to record compensation
earned but not recorded			-			-			-			(60,000	)		(60,000	)
Stock issued for services			3,077,000			3,077			126,371			-			129,448
Stock issued for cash			1,479,000			1,479			146,421			-			147,900
Net loss for the year			-			-			-			(267,887	)		(267,887	)
Balance, December 31, 2002			35,689,560			35,690			723,851			(647,108	)		112,433
Adjustment to record compensation
earned but not recorded			-			-			-			(90,000	)		(90,000	)
Stock issued for services			15,347,000			15,347			-			-			15,347
Stock issued for cash			1,380,000			1,380			33,620			-			35,000
Reverse split 1:10			(47,174,904	)		-			-			-			-
Par value $0.0001 to $0.0002			-			(51,369	)		51,369			-			-
Net loss for the year			-			-			-			(51,851	)		(51,851	)
Balance, December 31, 2003			5,241,656			1,048			808,840			(788,959	)		20,929
Additional Founders shares issued			25,000,000			5,000			(5,000	)		-			-
Stock issued for services			24,036,000			4,807			71,682			-			76,489
Stock issued for cash			360,000			72			28,736			-			28,808
Warrants issued to purchase common
stock at $.025			-			-			18,900			-			18,900
Warrants issued to purchase common
stock at $.05			-			-			42,292			-			42,292
Stock warrants exercised			2,100,000			420			60,580			-			61,000
Net loss for the year			-			-			-			(617,875	)		(617,875	)
Balance, December 31, 2004			56,737,656			11,347			1,026,030			(1,406,834	)		(369,457	)
Stock issued for services			5,850,000			1,170			25,201			-			26,371
Stock issued to settle liabilities			5,000,000			1,000			99,000			-			100,000
Stock issued for cash			1,100,000			220			72,080			-			72,300
Warrants issued to purchase common
stock at $.025			-			-			62,300			-			62,300
Warrants issued to purchase common
stock at $.05			-			-			140,400			-			140,400
Stock warrants exercised			5,260,000			1,052			172,948			-			174,000
Net loss for the year			-			-			-			(592,811	)		(592,811	)
Balance, December 31, 2005			73,947,656		$	14,789		$	1,597,959		$	(1,999,645	)	$	(386,897	)

 

See notes to financial statements

 

F-22

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

Period from Inception (January 1, 2001) to December 31, 2006

											Deficit
											Accumulated
								Additional			During the
		Common  Stock						Paid-In			Development
		Shares			Par Value			Capital			Stage			Total
Stock issued for services			4,700,000			940			205,597			-			206,537
Debentures converted			3,000,000			600			149,400			-			150,000
Stock issued for cash			200,000			40			16,160			-			16,200
Warrants issued to purchase
common stock at $.025			-			-			18,400			-			18,400
Warrants issued to purchase
common stock at $.05			-			-			15,400			-			15,400
Warrants converted to purchase
common stock at $.025			10,220,000			2,045			253,455			-			255,500
Warrants converted to purchase
common stock at $.05			6,260,000			1,252			311,748			-			313,000
Net loss for the year			-			-			-			(1,469,888	)		(1,469,888	)
Balance, December 31, 2006			98,327,656		$	19,666		$	2,568,119		$	(3,469,533	)	$	(881,748	)

 

See notes to financial statements

 

F-23

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3DIcon CORPORATION

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

Years ended December 31, 2006 and 2005

and period from Inception (January 1, 2001) to December 31, 2006

								Inception to
								December 31,
		2006			2005			2006
Cash Flows from Operating Activities
Net loss		$	(1,469,888	)	$	(592,811	)	$	(3,469,533	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued for services			206,537			26,371			642,323
Depreciation			352			-			352
Asset impairments			-			-			292,203
Change in:
Prepaid expenses and other assets			(101,146	)		(3,450	)		(104,596	)
Accounts payable and accrued
liabilities			25,867			100,759			432,584
Net cash used in operating activities			(1,338,278	)		(469,131	)		(2,206,667	)
Cash Flows from Investing Activities
Purchase of office furniture and equipment			(5,162	)		-			(5,162	)
Net cash used in investing activities			(5,162	)		-			(5,162	)
Cash Flows from Financing Activities
Proceeds from stock and warrant sales and
exercise of warrants			618,500			449,000			1,474,250
Proceeds from issuance of debentures			780,000			160,000			940,000
Net cash provided by financing activities			1,398,500			609,000			2,414,250
Net increase in cash			55,060			139,869			202,421
Cash, beginning of year			147,371			7,502			10
Cash, end of year		$	202,431		$	147,371		$	202,431
Supplemental Disclosures
Non-Cash Investing and Financing Activities
Conversion of debentures to
common stock		$	150,000			-		$	150,000

 

See notes to financial statements

 

F-24

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3DIcon CORPORATION

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

December 31, 2006 and 2005 and period from inception

(January 1, 2001) to December 31, 2006

 

Note 1 - Organization and Operations

Organization 

3DIcon Corporation (the “Company”) was incorporated on August 11, 1995, under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended August 1, 2003 to change the name to 3DIcon Corporation. The initial focus of First Keating Corporation was to market and distribute books written by its founder, Martin Keating. During 2001, First Keating Corporation began to focus on the development of 360-degree holographic technology. The effective date of this transition is January 1, 2001, and the financial information presented is from that date through the current period. The Company has accounted for this transition as a reorganization and accordingly, restated its capital accounts as of January 1, 2001. From January 1, 2001, the Company's primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the formation and commercialization of interactive, optical holography for the communications and entertainment industries.

 

The mission of the Company is to pursue, develop and market full-color, 360-degree person-to-person holographic technology. Its primary focus is to invest and participate in the commercialization of optical holographic technologies now planned and/or under development, particularly those employing derivative broadband, satellite-based systems. At this time, the Company owns no intellectual property rights in holographic technologies and has no contracts or agreements pending to acquire such rights.

 

Uncertainties

The accompanying financial statements have been prepared on a going concern basis. The Company is in the development stage and has no source of revenue to fund the development of its planned product or to pay operating expenses. This has resulted in the Company realizing a cumulative net loss of $3,469,533 for the period from inception (January 1, 2001) to December 31, 2006, and a net loss of $1,469,888 and $592,811 for the years ended December 31, 2006 and 2005, respectively. The Company is currently in default of its obligations under its Sponsored Research Agreement (SRA) (Note 4) and its 8% unsecured debentures due 2007. The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its planned products. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

F-25

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Note 1 - Organization and Operations (continued)

Uncertainties (continued)

Management plans to fund the future operations of the Company with the proceeds from exercise of stock warrants of up to $424,000 in 2007 and $80,000 in 2008. Further, the Company has negotiated funding from Golden Gate Investors, Inc. (see Note 5) and is continuing to pursue additional capitalization through Rule 144 stock sales, debentures, and other venture capital investments. There is also the possibility of revenue in 2007 from sales and licensing of the Company’s products.

 

Note 2 - Summary of Significant Accounting Policies 

Research and development

Research and development costs, including payments made to the University of Oklahoma pursuant to the SRA, are expensed as incurred. (Note 4).

Stock-based compensation

The Company accounts for stock-based compensation arrangements for employees in accordance with Statement of Financial Accounting Standards (SFAS) No. 123(R ), Share-Based Payments. The Company recognizes expenses for employee services received in exchange for stock based on the grant-date fair value of the shares awarded. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 , Accounting for Stock-Based Compensation , and the related Emerging Issues Task Force (EITF) Consensuses.

 

Income taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes . SFAS No. 109 requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, SFAS No. 109 requires the recognition of future tax benefits, such as net operating loss carry forwards, to the extent that realization of such benefits is more likely than not. The amount of deferred tax liabilities or assets is calculated using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

 

F-26

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Note 2 - Summary of Significant Accounting Policies 

Net income (loss) per common share

The Company computes net income (loss) per share in accordance with SFAS No. 128 , Earnings per Share and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of SFAS No. 128 and SAB 98, basic net income (loss) per common share is based on the weighted-average outstanding common shares. Diluted net income (loss) per common share is based on the weighted-average outstanding shares adjusted for the dilutive effect of warrants to purchase common stock and convertible debentures. Due to the Company’s losses, such potentially dilutive securities are anti dilutive for all periods presented. The weighted average number of potentially dilutive shares is 14,705,000 and 26,140,000 for the years ended December 31, 2006 and 2005, respectively.  

 

Use of estimates

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.

 

Note 3 - Recent Accounting Pronouncements

The following are summaries of recent accounting pronouncements that are relevant to the Company:

In May 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (SFAS 154), which replaces APB Opinion No. 20, Accounting Changes , and FASB Statement 3, Reporting Accounting Changes in Interim Financial Statements. This statement changes the requirements for the accounting for and reporting of a change in accounting principle, including all voluntary changes in accounting principles. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires voluntary changes in accounting principles be recognized retrospectively to prior periods' financial statements, rather than recognition in the net income of the current period. Retrospective application requires restatements of prior period financial statements as if that accounting principle had always been used. This statement carries forward, without change, the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. The provisions of SFAS No. 154 is beginning January 1, 2006. It had no effect on the accompanying financial statements.

F-27

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Note 3 - Recent Accounting Pronouncements (continued)

In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48 , Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109 , Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to have a material effect on its financial statements and related disclosures.

 

In September 2006, the FASB issued SFAS No. 157 , “ Fair Value Measurements” (SFAS 157). This statement defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 157 on our financial condition and results of operations.

 

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objection of the statement is to provide entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective as of the beginning of an entity’s fiscal year beginning after November 15, 2007. SFAS No. 159 is not expected to significantly impact the Company’s Consolidated Financial Statements.

 

Note 4 - Commitments and Contingencies 

On April 20, 2004, the Company entered into a SRA entitled "Investigation of Emerging Digital Holography Technologies" (Phase I) with the University of Oklahoma - Tulsa (“University”), which expired October 19, 2004. The Company paid the University $14,116 pursuant to this agreement. On July 15, 2005, the Company entered into a SRA with the University (Phase II), which expires January 14, 2007. Under this agreement the University conducted a research project entitled "Investigation of Emerging 3-Dimensional Display Technologies" and the Company agreed to pay the University $453,584 at various dates from November 10, 2005 through July 15, 2006 to cover the costs of the research. The final payment of $226,792, due on July 15, 2006, was not paid and the agreement was modified in November 2006 to provide $125,259 additional funding, extend the term of the agreement through March 31, 2007, and revise the payment schedule to combine the July 15, 2006 remaining balance due of $226,792 with the additional funding into a revised payment schedule. Under the terms of the agreement the Company agreed to pay the combined remaining obligation of $352,052 in four equal installments of $88,013 on December 31, 2006 through March 31, 2007. The Company is in default on its March 31, 2007 payment. On February 23, 2007 the Company entered into a SRA with the University (Phase III) which expires March 31, 2010. Under this agreement the University will conduct a research project entitled “3-Dimensional Display Development” that seeks to make significant progress in the development of 3-dimensional display technologies. The company will pay the University $3,468,595 payable in monthly installment ranging from $92,263 to $112,777 beginning April 30, 2007 and ending March 31, 2010.

F-28

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Note 4 - Commitments and Contingencies (continued)

3DIcon has a consulting agreement with Concordia Financial Group. Concordia counsels 3DIcon regarding financial matters and the acquisition of capital, including rendering advice in the preparation of models for financial projections, identification of sources for capital in the start-up phase technology company capital market, development of business models, and assistance with the structuring of transactions involving the raising of capital. 3DIcon pays a monthly fee for Concordia’s services of approximately $2,000 per month. 3DIcon paid Concordia approximately $54,000 for the year ended December 31, 2006.

 

At December 31, 2006 and 2005, 17,000,000 shares of common stock are held by a third party and are in dispute as to whether or not they are legally issued. Management contends that the shares were not legally issued and should be returned to the Company. However, they are reported as issued and outstanding at par value in the accompanying financial statements due to the uncertainty surrounding resolution of the issue. The Company paid approximately $255,000 in legal fees for the year ended December 31, 2006 related to this issue, which is included in general and administrative expenses in the accompanying statement of operations.

Note 5 - Debentures Payable

Debentures payable consist of the following:

		December 31,			December 31,
		2006			2005
Senior Convertible Debentures:
8.00% Debentures due 2007		$	135,000		$	160,000
6.25% Debentures due 2009			125,000			-
4.75% Debentures due 2011			100,000			-
			360,000			160,000
8.00% Unsecured Debentures due 2007			430,000			-
Total Debentures at December 31			790,000			160,000
Current Maturities			(565,000	)		-
Long-term Debentures at
December 31		$	225,000		$	160,000

F-29

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Note 5 - Debentures Payable (continued)

Senior debenture payable

The Company issued convertible debentures aggregating $160,000 during 2005 and issued an additional $125,000 during 2006 at par value for cash. The debentures bear interest at 8% per annum, and are due no later than December 31, 2007. The Company may prepay without penalty all of the outstanding principal amount and accrued interest. Upon receiving notice of the Company's intent to prepay, holders of the debentures may convert the principal amount due to common stock at the rate of one share of common stock for each $.05 of principal amount converted. Upon conversion, the Company will pay all accrued interest. No fractional shares will be issued upon conversion of a debenture. During 2006 debentures totaling $150,000 were converted to 3,000,000 shares of common stock.

 

Unsecured debentures payable

During the third quarter of 2006 the Company authorized the issuance of unsecured convertible debentures aggregating $800,000. As of December 31, 2006 the Company has issued $430,000 of these debentures at par value for cash. The debentures bear interest at 8% per annum, are convertible to common shares at $0.40 per share and are due no later than March 31, 2007. At the option of the Company, interest may be paid in cash or Common Stock, valued at the bid price on the day immediately prior to the date paid. The debentures are not secured by any asset or pledge of the Company or any officer, stockholder or director. The Company has agreed to provide, with respect to the common shares issued upon conversion of the debentures, certain registration rights under the Securities Act of 1933. At December 31, 2006 the balance outstanding of $430,000 in unsecured debentures payable may be converted to 1,075,000 shares of the Company’s common stock. The Company is in default with respect to the unsecured debentures. As a result of the default, the debentures are due in cash on the demand of the holders, but can be converted into common stock at a conversion price of $0.05 at the request of the holders at anytime.

 

Securities Purchase Agreement 

To obtain funding for the ongoing operations, the Company entered into a Securities Purchase Agreement with Golden Gate Investors, Inc. (“Golden Gate”) on November 3, 2006, as amended on December 15, 2006 and February 6, 2007 (the “Purchase Agreement”), for the sale of a 6¼% convertible debenture of the Company in the principal amount of $1,250,000. Pursuant to the Purchase Agreement, at such time as the principal balance of this debenture is less than $400,000 as a result of conversion to common stock or payment, the Company shall have the right to require Golden Gate to purchase a second debenture, also in the principal amount of $1,250,000. On November 3, 2006, the Company also issued to Golden Gate a 4¾% convertible debenture in a principal amount of $100,000, due 2011, and warrants to buy 1,000,000 shares of the common stock at an exercise price of $10.90. The Company agreed to file a registration statement with the SEC for the resale of the common stock underlying the initial $1.25 million convertible debenture only.

F-30

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Note 5 - Debentures Payable (continued )

Golden Gate provided the Company with $125,000 upon execution of the Purchase Agreement. Pursuant to the Purchase Agreement, Golden Gate is required to provide the Company with an additional $312,500 upon effectiveness of the registration statement. The balance of $812,500 shall be wired to the escrow agent, which is required to release $200,000 on the first day of each month, beginning with the second month following the effective date of the registration statement.

 

The debentures bear interest at 6%, and are convertible into the Company’s common stock, at the selling stockholder’s option. The $1.25 million convertible debentures mature three years from the date of issuance. The $100,000 convertible debenture matures five years from the date of issuance. Interest on the 6% convertible debentures is payable monthly in cash or, at Golden Gate’s option, in shares of common stock of the Company valued at the then applicable conversion price. The initial $1.25 million convertible debenture is convertible into the number of the shares of common stock equal to the dollar amount of the debenture divided by the conversion price. The conversion price for the initial $1.25 million convertible debenture is (1) $.35 per share until the common stock is quoted on the OTC Bulletin Board or otherwise trading on the NASDAQ or a national securities exchange and (2) thereafter the lesser of (i) $2.00, (ii) 70% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The conversion price for the second $1.25 million convertible debenture is (1) $.35 per share until the common stock is quoted on the OTC Bulletin Board or otherwise listed as trading on the NASDAQ or a national securities exchange and thereafter (2) the lesser of (i) $2.00 or (ii) 90% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. The conversion price for the $100,000 convertible debenture is $.35 per share until the earlier of January 1, 2008 or the date the common stock is quoted on the OTC Bulletin Board or otherwise listed as trading on the NASDAQ or a national securities exchange and thereafter, the lesser of (i) $4.00 or (ii) 80% of the average of the five lowest volume weighted average prices during the twenty (20) trading days prior to the conversion. If Golden Gate elects to convert a portion of the debenture and, on the day that the election is made, the volume weighted average price is below $0.75, the Company shall have the right to prepay that portion of the debenture that Golden Gate elected to convert, plus any accrued and unpaid interest, at 135% of such amount.

 

In addition, the Company entered into a registration rights agreement with Golden Gate pursuant to which the Company agreed to file, within 30 days after the closing, the registration statement of which this prospectus is a part covering the common stock issuable upon conversion of the initial $1.25 million debenture only. In the event the Company fails to meet this schedule and other timetables provided in the registration rights agreement, liquidated damages and other potential penalties could be imposed (for example, the discount multiplier of 70% shall decrease by three percentage points for each month or partial month occurring after the Company fails to meet the timetables provided in the registration rights agreement).

F-31

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Note 5 - Debentures Payable (continued )

In addition, Golden Gate may demand repayment of one hundred and fifteen percent (115%) of the principal amount of the debenture, together with all accrued and unpaid interest on the principal amount of the debenture, in cash, if the Company fails to meet the timetables provided in the registration rights agreement.

 

In the event the Company elects, and Golden Gate fails to enter into the second debenture, Golden Gate would be required to pay liquidated damages in the amount of $250,000.

 

Note 6 - Common Stock and Paid-In Capital

 

At various dates throughout 2006 and 2005, the Company sold 200,000 and 1,100,000 shares, respectively, of common stock with warrants attached for $.25 per share pursuant to an exempt offering. Each subscriber received one share of common stock with two separate warrants to purchase additional shares of Rule 144 stock as follows: (a) ten times the number of shares within one year of the date subscribed at $.025 per share and (b) another ten times the number of shares within two years of the date subscribed at $.05 per share. Warrants not exercised under their terms will be terminated. The Company received $50,000 and $275,000, respectively, in cash from the exercise of the warrants.

 

At various dates throughout 2006 and 2005, the Company issued 6,260,000 and 1,740,000 shares, respectively, of its common stock pursuant to the exercise of $.05 warrants by non-employees. The Company received $313,000 and $86,000, respectively, in cash.

 

At various dates throughout 2006 and 2005, the Company issued 10,220,000 and 3,520,000, respectively, of its common stock pursuant to the exercise of $.025 warrants by non-employees. The Company received $255,500 and $88,000, respectively, in cash.

 

As of December 31, 2006, there are warrants outstanding to purchase 800,000 shares of common stock at $.025 per share expiring at various dates throughout 2007; warrants outstanding to purchase 8,080,000 of common stock at $.05 per share expiring at various dates throughout 2007; and warrants to purchase 1,600,000 shares of common stock at $.05 per share expiring in 2008.

 

Common stock issued for services

 

During 2006, 1,100,000 shares of common stock were issued for consulting services for which the Company recognized $15,438 of expense. During 2005, 2,010,000 shares of common stock were issued for consulting services which the Company recognized $2,469 of expenses. Additionally, the Company issued 2,700,000 and 7,880,000 shares of common stock at various dates throughout 2006 and 2005, respectively, to its President and Chief Executive Officer for services rendered. The Company issued 900,000 and 960,000 shares at various dates throughout 2006 and 2005, respectively, to its employee for services rendered. The shares are valued using the same discount structure as the other common stock transactions and ranged from $0.01 to $0.09 during 2006 and $.0004 to $.0074 during 2005. The Company recognized $191,100 and $23,903 in compensation expense in 2006 and 2005, respectively, related to these transactions.

 

F-32

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Note 6 - Common Stock and Paid-In Capital (continued)

 

During 2004, the Company issued 25,000,000 additional founders shares due to the reverse stock split in 2003 and the corporate reorganization that took place during 2004. The shares were valued at the closing price of the stock on or previous to the date of issuance less a 50% discount due to the restrictive nature of the stock, a 50% discount for lack of earnings or sales consistency of the Company, a 50% discount due to the dollar and share volume of sales of the Company's securities in the public market, and an additional 35% discount due to the trading market in which the Company's securities are sold.

 

Common stock rights

Holders of shares of common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders. Shares of common stock do not have cumulative voting rights.

Holders of record of shares of common stock are entitled to receive dividends when and if declared by the board of directors. To date, the Company has not paid cash dividends. The Company intends to retain any earnings for the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.

 

Any future determination as to the payment of cash dividends will depend on future earnings, results of operations, capital requirements, financial condition and such other factors as the board of directors may consider.

 

Upon any liquidation, dissolution or termination of the Company, holders of shares of common stock are entitled to receive a pro rata distribution of the assets of the Company after liabilities are paid.

 

Holders of common stock do not have pre-emptive rights to subscribe for or to purchase any stock, obligations or other securities of 3DIcon.

 

Note 7 - Income taxes

 

At December 31, 2006 and 2005, the Company had accumulated net operating losses of approximately $3,115,000 and $1,588,000, respectively, available to reduce future federal and state taxable income. Unless utilized, the loss carry forward amounts will begin to expire in 2013.

 

Deferred tax assets resulting from the operating loss carryforward, are reduced by a valuation allowance.

F-33

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Note 7 - Income taxes (continued)

 

The deferred tax asset consisted of the following:

		December 31,			December 31,
		2006			2005
Loss carry forward amount		$	3,115,000		$	1,588,000
Effective tax rate			38	%		38	%
Deferred tax asset			1,183,700			603,440
Less valuation allowance			(1,183,700	)		(603,440	)
Net deferred taxes		$	-		$	-

 

F-34

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our bylaws provide that 3DIcon may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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NATURE OF EXPENSE AMOUNT

 

SEC Registration fee		$	197.58
Accounting fees and expenses			15,000	*
Legal fees and expenses			50,000	*
TOTAL		$	65,197.58	*

 

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*	Estimated.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

To obtain funding for ongoing operations, the Company entered into a Bridge Financing Agreement with Golden Gate which closed on June 11, 2007 (the “Financing Agreement”), for the sale of a 9.75% convertible debenture in the principal amount of $700,000. Pursuant to the Financing Agreement, the Company agreed to file a registration statement with the SEC within three days of closing for the resale of the common stock underlying the initial $1.25 million convertible debenture as discussed in Note 6.

The debenture may be converted, at Golden Gate’s option, in whole or in part, into restricted shares of the Company’s common stock. The conversion price will be $0.28 until the earlier of, the Company’s shares trading on the OTC Bulletin Board or other trading market that the SEC recognizes as a trading market, or January 1,2008.  Subsequently, the conversion price is equal to 72% of the average of the five lowest volume weighted average prices for the common stock for the 20 trading days prior to the conversion date. The convertible debenture matures June 11, 2007; subject to an option held by Golden Gate to extend the maturity for one period of six months. Interest on the convertible debenture is payable monthly in cash.

In addition to standard default provisions concerning timeliness of payments, delivery and notifications, any other event of default, as defined in the debenture, will accelerate the maturity date of the debenture, and all outstanding principal and accrued and unpaid interest along with $250,000 in liquidated damages, will become immediately due and payable. Such events of default include: failure to observe or perform material covenants of any notes; the making of a representation or warranty in any material agreement, report of financial statement; filing of a voluntary or involuntary proceeding for bankruptcy by the Company; a default under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument; the common stock of the Company trades below $0.21 per share; the Company is a party to any Change of Control Transaction and agrees to sell or dispose of all or in excess of 33% of its assets in one or more transactions (whether or not such sale would constitute a Change of Control Transaction) or shall redeem or repurchase more than ten percent (10%) of its outstanding shares of Common Stock or other equity securities of the Company; the Company does not file the Registration Statement, as amended to reflect the Company’s responses to the latest comments made to such Registration Statement by the Commission relating to the Registration Rights Agreement dated November 3, 2006 between the Company and Golden Gate Investors Inc. by June 14, 2007 or the related Registration Statement is not declared effective by the Commission on or prior to September 14, 2007; if during the effectiveness period of such Registration Statement its effectiveness lapses or the selling stockholder is unable to sell its shares for a period of 20 days; the Company fails to deliver certificates following a conversion under the debenture within 3 days; or any monetary judgment, writ or similar final process shall be entered or filed against the Company, any Subsidiary or any of their respective property or other assets for more than $250,000, and such judgment, writ or similar final process shall remain unvacated, unabandoned or unstayed for a period of 45 calendar days.

The Debenture is secured by the pledge of 11 million shares of common stock held by affiliates in the Company (the “Pledged Shares”). Such shares shall have been held by the Pledgors for a period of not less than two years. In the event of a default and the Company has not repaid all outstanding principal and accrued and unpaid interest, along with the liquidated damages of $250,000 within one day of default, Golden Gate shall have the right to immediately sell the Pledged Shares in satisfaction of any amounts of principal and interest owing under the Debenture. Golden Gate shall only sell such amount of Pledged Shares to satisfy any principal and accrued interest, along with $250,000 in liquidated damages and shall return unsold shares to the Pledgors .

During 2005, 2,010,000 shares of common stock were issued for consulting services for which the Company recognized $2,469 of expense. During 2004, 3,376,000 shares of common stock were issued for services for consulting which the Company recognized $26,829 of expenses.

Additionally, the Company issued 7,880,000 and 1,980,000 shares of common stock at various dates throughout 2005 and 2004, respectively, to its President and Chief Executive Officer for services rendered. The Company issued 960,000 and 1,660,000 shares at various dates throughout 2005 and 2004, respectively, to its employee for services rendered. The shares are valued using the same discount structure as the other common stock transactions and ranged from $.0004 to $.0074 during 2005 and $.002 to $.014 during 2004. The Company recognized $23,903 and $49,465 in compensation expense in 2005 and 2004, respectively, related to these transactions.

II-2

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At various dates throughout 2005 and 2004, the Company sold 1,100,000 and 360,000 shares, respectively, of common stock with warrants attached for $.25 per share pursuant to an exempt offering. Each subscriber received one share of common stock with two separate warrants to purchase additional shares of Rule 144 stock as follows: (a) ten times the number of shares within one year of the date subscribed at $.025 per share and (b) another ten times the number of shares within two years of the date subscribed at $.05 per share. Warrants not exercised under their terms will be terminated. The Company received $275,000 and $90,000, respectively, in cash.

At various dates throughout 2005 and 2004, the Company issued 1,740,000 and 340,000 shares, respectively, of its common stock pursuant to the exercise of $.05 warrants by non-employees. The Company received $86,000 and $17,000, respectively, in cash.

At various dates throughout 2005 and 2004, the Company issued 3,520,000 and 1,760,000, respectively, of its common stock pursuant to the exercise of $.025 warrants by non-employees. The Company received $88,000 and $44,000, respectively, in cash.

During 2004, the Company issued 25,000,000 additional shares to the Company’s founder, President and Chief Executive Officer due to the reverse stock split in 2003 and the corporate reorganization that took place during 2004. The shares were valued at par value.

* All of the above offerings and sales were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of 3DIcon Corporation or executive officers of 3DIcon Corporation, and transfer was restricted by 3DIcon Corporation in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.

Except as expressly set forth above, the individuals and entities to whom we issued securities as indicated in this section of the registration statement are unaffiliated with us.

ITEM 27. EXHIBITS.

The following exhibits are included as part of this Form SB-2. References to "the Company" in this Exhibit List mean 3DIcon Corp., an Oklahoma corporation.

3.1		Certificate of Incorporation (1)
3.2		Bylaws (1)
3.3		Amended Certificate of Incorporation (1)
3.4		Amended Certificate of Incorporation (1)
3.5		Amended Certificate of Incorporation (1)
5.1		Consent of Sichenzia Ross Friedman Ference LLP (2)
10.1		Securities Purchase Agreement (1)
10.2		Amendment No. 1 to Securities Purchase Agreement and Debenture (1)
10.3		Registration Rights Agreement (1)
10.4		$100,000 convertible debenture (1)
10.5		$1.25 million convertible debenture (1)
10.6		Common Stock Purchase Warrant (1)
10.7		Sponsored Research Agreement by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
10.8		Sponsored Research Agreement Modification No. 1 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
10.9		Sponsored Research Agreement Modification No. 2 by and between 3DIcon Corporation and the Board of Regents of the University of Oklahoma (1)
10.10		Amendment No. 2 to Securities Purchase Agreement, Debentures, and Registration Rights Agreement (2)
10.11		Securities Purchase Agreement dated June 11, 2007 (2)
10.12		$700,000 Convertible Debenture (2)
23.1		Consent of Sichenzia Ross Friedman Ference LLP (see Exhibit 5.1)
23.2		Consent of Tullius Taylor Sartain & Sartain LLP

 

(1)

Incorporated by reference to Form SB-2 as filed on December 15, 2006 (File No. 333-139420) and subsequently withdrawn on February 5, 2007

(2)

Incorporated by reference to Form SB-2 as filed on June 14, 2007 (File No. 333-143761)

 

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ITEM 28. UNDERTAKINGS.

 

The undersigned registrant hereby undertakes to:

 

(1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and (iii) Include any additional or changed material information on the plan of distribution.

 

(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

 

(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

 

(4) For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i) Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer; (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and (iv) Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

(5) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

II-4

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant, 3DIcon Corporation, certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this Registration Statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto duly authorized.

	3DICON CORPORATION
		/s/ Martin Keating
		Name: Martin Keating
		Title:  Chief Executive Officer               (Principal Executive and Financial Officer)

 

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form SB-2 has been signed below by the following persons in the capacities and on the dates indicated:

SIGNATURE		TITLE		DATE
By:   /s/ Martin Keating		Chief Executive Officer, Director		June 29, 2007
Martin Keating
By: *		President, Chief Operating Officer		June 29, 2007
Vivek Bhaman
By:  *		Director		June 29, 2007
Philip Suomu
By: *		Director		June 29, 2007
John O’Connor

*By: /s/ Martin Keating
Martin Keating Attorney in Fact

II-5

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EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

 

We consent to the use in this Registration Statement on Form SB-2 of 3DIcon Corporation of our report dated April 27, 2007, relating to our audits of the financial statements appearing in the Prospectus, which is part of this Registration Statement. Our report dated April 27, 2007 relating to the financial statements includes an emphasis paragraph relating to an uncertainty as to the Company's ability to continue as a going concern. We also consent to the reference to our firm under the captions "Experts" in such Prospectus.

 

/s/ TULLIUS TAYLOR SARTAIN & SARTAIN LLP

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Tulsa, Oklahoma

June 29, 2007

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